Housing Authority of Covington

Finding 2025-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public and Indian Housing Program Federal Assistance Listing Numbers: 14.850 Noncompliance – A. Activities Allowed or Unallowed Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Activities Allowed or Unallowed Criteria: Uniform Guidance (2 CFR §200.302(b)(3)) requires entities to maintain effective control over and accountability for all funds, property, and other assets and to adequately safeguard all assets used solely for authorized purposes. Additionally, HUD program regulations and the ACC require that Public and Indian Housing program funds be used only for eligible program costs and not commingled with other funds, except as permitted by HUD. Interfund and affiliate receivable/payable transactions recorded in a PHA’s books of account may indicate the existence of temporary loans which introduce the risk for the potential misuse of Operating funds for nonprogram purposes (42 USC 1437g(e)). Condition: Based upon inspection of the Authority’s files and on discussion with management, we noted that the Authority utilized interfund advances between the Public and Indian Housing program and other Authority funds to address short-term cash flow needs. These interfund balances were not consistently supported by formal agreements, repayment terms, or documented HUD approval where required. In addition, several interfund balances remained outstanding for extended periods and were not timely reconciled or settled. Context: Our testing identified multiple interfund balances between the Public and Indian Housing program and other Authority funds that were utilized for short-term cash flow purposes. Several of these balances remained outstanding for extended periods without formal documentation, repayment terms, or evidence of periodic reconciliation. Known Questioned Costs: Unknown Cause: There is a significant deficiency in internal controls over the compliance for the activities allowed or unallowed type of compliance related to misuse of interfunds. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that reasonably assures the program is in compliance. Effect: The Public and Indian Housing Program is in non-compliance with the activities allowed or unallowed type of compliance related to misuse of interfunds. The Authority was unable to demonstrate that Public and Indian Housing program funds were used exclusively for allowable program purposes. Prolonged outstanding interfund balances increase the risk of fund commingling, noncompliance with HUD requirements, and misstatement of program financial activity. Recommendation: We recommend that the Authority establish and implement formal policies governing interfund activity, including requirements for documentation, approval, repayment terms, and ongoing monitoring. Interfund balances should be reconciled regularly and settled timely. Management should also ensure that Public and Indian Housing program funds are used solely for allowable program purposes and that any interfund transactions comply with HUD and Uniform Guidance requirements.

Finding 2025-003 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public and Indian Housing Program Federal Assistance Listing Numbers: 14.850 Noncompliance – E. Eligibility Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Eligibility Criteria: Tenant Files. The PHA must do the following: As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, and 960.259). Determine income eligibility and calculate the tenant's rent payment using the documentation from third party verification in accordance with 24 CFR Part 5, Subpart F (24 CFR sections 5.601 et seq.) and 24 CFR Subpart C sections 960.253, 960.255, and 960.259). These files are required to be maintained and available for examination at the time of audit. Condition: Based upon inspection of the Authority’s files and on discussion with management, there were documents that were unavailable for examination at the time of audit. Context: There are approximately six hundred forty seven (647) Public and Indian Housing units. Of a sample size of twenty (20) tenant files, the following information was unavailable for examination at the time of audit:  Original applications were missing in six (6) files  Declaration of citizenship forms were missing in six (6) files Our sample size is statistically valid. Known Questioned Costs: Unknown Cause: There is a significant deficiency in internal controls over the compliance for the eligibility type of compliance related to the maintenance of tenant files. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that reasonably assures the program is in compliance. Effect: The Public and Indian Housing Program is in non-compliance with the eligibility type of compliance related to the maintenance of tenant files. Recommendation: We recommend the Authority strengthen internal controls over eligibility compliance by implementing formal procedures to ensure all required tenant eligibility documentation is obtained, reviewed, retained, and readily available for examination. Management should also perform periodic internal reviews of tenant files to confirm completeness and compliance with HUD requirements. These procedures will reasonably assure compliance with the Uniform Guidance and the compliance supplement.

Finding 2023-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public and Indian Housing Program Assisted Listing Number: 14.850 Noncompliance – E. Eligibility - Tenant Files Non Compliance Material to the Financial Statements: Yes Material Weakness in Internal Control over Compliance for Eligibility Criteria: Tenant Files. The PHA must do the following: As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). These files are required to be maintained and available for examination at the time of audit. Condition: Based upon inspection of the Authority’s files and on discussion with management, there were files in which the verification of income eligibility was not properly performed. Context: Of a sample size of twenty (20) tenant files, two (2) files had income which was not properly calculated and verified. Our sample size is statistically valid. Known Questioned Costs: $10,806 Cause: There is a material weakness in internal controls over the compliance for the eligibility type of compliance related to the maintenance of tenant files. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that reasonably assures the program is in compliance. Authority Response: The Authority agrees with the finding and is in process of assessing and modifying controls over compliance to avoid similar issues. The Authority will increase oversight of the compliance of program.

Reference Number: 2022-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Public Housing Capital Fund Assistance Listing Number: 14.872 Award Period: 2018, 2019, 2020, 2021 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria: Cash management and disbursement Capital Funds: To initiate disbursement of Capital Funds, the Authority must submit a voucher for payment through LOCCS. The Authority may only submit a voucher to disburse funds for bills due and payable for work that has already been performed or for items received. Once funds are disbursed, i.e., transferred from LOCCS to the Authority?s bank account, the Authority must pay the applicable bill(s) within 3 business days after the deposit of the funds into the Authority?s bank account. The Authority cannot expend nonfederal funds first to pay the applicable bills and then use Capital Funds to reimburse themselves. Condition: There were bill(s) identified in sample of the Capital Funds first paid through nonfederal funds and reimbursed at a later date by use of Capital Funds. We noted bill(s) dated and paid up to and at times exceeding a year before the Capital Funds reimbursed date. Questioned Costs: Not applicable. Effect: These deficiencies result in the possibility that errors or irregularities can exist and not be detected by the Housing Authority?s internal control. Recommendation: The Housing Authority should timely submit a voucher to disburse funds for bills due and payable for work that has already been performed or for items received.

Reference Number: 2021-002 Program: Public Housing Capital Fund Criteria: Cash management and disbursement Capital Funds: To initiate disbursement of Capital Funds, the Authority must submit a voucher for payment through LOCCS. The Authority may only submit a voucher to disburse funds for bills due and payable for work that has already been performed or for items received. Once funds are disbursed, i.e., transferred from LOCCS to the Authority?s bank account, the Authority must pay the applicable bill(s) within 3 business days after the deposit of the funds into the Authority?s bank account. The Authority cannot expend nonfederal funds first to pay the applicable bills and then use Capital Funds to reimburse themselves. Condition: There were bill(s) identified in sample of the Capital Funds first paid through nonfederal funds and reimbursed at a later date by use of Capital Funds. We noted bill(s) dated and paid up to and at times exceeding a year before the Capital Funds reimbursed date. Questioned Costs: Not applicable. Effect: These deficiencies result in the possibility that errors or irregularities can exist and not be detected by the Housing Authority?s internal control. Recommendation: The Housing Authority should timely submit a voucher to disburse funds for bills due and payable for work that has already been performed or for items received. Management?s Response: Management concurs with the recommendation to implement timely LOCCS fundings that coincide with our normal accounting cycle.

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